The Lucent Accounting Scandal

            
 
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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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Case Details:

Price:

Case Code : FINC039 For delivery in electronic format: Rs. 400;
For delivery through courier (within India): Rs. 400 + Rs. 25 for Shipping & Handling Charges

Themes

Accounting Scam
Case Length : 14 Pages
Period : 1999 - 2004
Pub. Date : 2005
Teaching Note : Not Available
Organization : Lucent
Industry : Telecom
Countries : USA

Abstract:

The case discusses the accounting frauds committed at the US-based telecommunications giant, Lucent Technologies Inc. (Lucent) during early 2000. It provides an insight into the ways by which the financial statements were manipulated at Lucent.

It examines the loopholes in the financial management of the company and the price it had to pay for circumventing the provisions of law. The case examines the allegations against Lucent and its officers with reference to the Securities Exchange Act, 1934. Finally, the case throws light on the damage control measures taken up by the new CEO to improve the company's performance and restore investor confidence.

Finance | Case Study in Management, Operations, Strategies, Finance, Case Studies

Issues:

The need for sufficient internal control measures and transparency in the financial statements of a company

The provisions of the laws with regard to finance-related scandals and the rigorous consequences for misleading the investors

The importance of maintaining corporate integrity without succumbing to the temptation of short term benefits

Analyse the issue of corrupt/unethical business practices and lack of good corporate governance, and the effect of the above on a company's financial status and image

Discuss the role and responsibility of the senior executives, the board of directors and the external auditors and the nature and extent of the failure to avert the situation

Identify the loopholes in accounting systems and understand the methods employed by companies to manipulate their financial statements to their advantage

Differentiate between revenue and capital expenditure and the impact of misclassification on the financial position of a company

Contents:

  Page No.
Introduction 1
Background Note 2
The Class Action Suit 3
Charges of Accounting Fraud 5
The Result 8
Exhibits 10

Keywords:

Case, Lucent Technologies, Accounting Scandal, Class Action Suit, Window Dressing, Financial Mismanagement, Accounting Fraud, Securities Exchange Act, Internal Control, US GAAP and Unethical Practices

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